Question
Ludd Ltd. (LL), a publicly accountable entity, has a cash-generating unit (CGU). LL is required to perform an impairment test on the CGU. LL provided
Ludd Ltd. (LL), a publicly accountable entity, has a cash-generating unit (CGU). LL is required to perform an impairment test on the CGU. LL provided the following information relating to its CGU: Carrying value Fair value less costs of disposal Equipment $ 800,000 $ 300,000 Building 1,200,000 1,100,000 Land 500,000 650,000 Goodwill 600,000 N/A Total $3,100,000 $2,050,000 The CGU is expected to generate cash flows of $250,000 per year for the next 10 years, after which the residual value is expected to be the value of the land only, at a fair value less costs to sell of $800,000. LL has a discount rate of 7%. Required: a) Identify and describe one internal and one external source of information that are indications of an asset's impairment. (2 marks) b) Calculate the impairment loss on LL's CGU. Show your calculations. (2 marks) c) Allocate the impairment loss to the assets of LL's CGU. (3.5 marks) d) Prepare the journal entry to record the impairment of the CGU. (1.5 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started